Damac shields delivery jibes

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You recently announced expansion into Egypt with the Gamsha Bay resort. Is this an indication that Damac is boosting its presence outside the Middle East?

Yes, we see ourselves as part of expansion plans across North Africa and the Asian subcontinent, and last year we announced a joint venture development with the regional government of Tianjin in China.

Is this due to a concern that the growth of Dubai is slowing down?

That isn't the reason. We believe we have a business model that is exportable, and in wanting to grow the business beyond its current boundaries, we are looking further afield. We see Dubai continuing to have a major share of our turnover as we grow. But the other challenge in Dubai is that we cannot be a ‘masterplan developer' - that is the remit of the government. All of the land here is given to Emaar, Dubai Properties or Nakheel. So, in wanting to be masters of our own destiny, we are going further afield.

What are going to be the main challenges for Dubai in the future?

Dubai's vision for the future is still exceptional, and the various measures the government has taken to make tourists, businesses, financial institutions and IT providers comfortable within the Dubai environment will, I believe, sustain the city for a long time to come.

But the two biggest challenges I believe Dubai faces going forward is transport and infrastructure. The road network is not coping, the explosion of vehicles is incredible, and the government is having to play catch-up. While I think that the metro is needed, it is not going to be the panacea to cure all ills. And the other big challenge is for Dubai Electricity and Water Authority; it must be under incredible amounts of pressure to provide the electricity, water and drainage to these huge developments.

These are big challenges, but there are bright people in the government. They are not blind to them, and while we are suffering as a result of some of the bottlenecks that exist within the transport system at peak times, a lot of this will be much more comfortable in a few years time.

Damac received a fair amount of criticism last year over some late deliveries...

Marina Terrace was five and a half months late and the Waves were six months late. There were a number of reasons; affection plans came late from the master developers, the contractors, although working as fast as they could, struggled with their subcontractors, so yes, they were delivered late.

But in the case of all our projects, if we are late, customers get interest on their money. And in the case of Marina Terrace and the Waves, we also provided the customers with white goods in the form of washer dryers and dishwashers. That pain is eased, though, as they are sitting on capital appreciation that in some cases is 200% of their asking price, and those who bought into Marina Terrace early are showing a rental yield in excess of 20%.

But it doesn't excuse the fact that we were late and doesn't excuse the fact that our customers have every right to complain. And we have tried to address those issues; going forward we have boosted customer relations to answer queries, and added dramatically to our projects and engineering department to ensure we have every single resource available to work closely with contractors and consultants, to ensure delivery on time, and to the required quality standard.

Is there a case for being more proactive rather than reactive to these issues?

In 2002, 2003 and early 2004 we were largely reactive. Today, I believe we are very proactive; we look to identify challenges well ahead of when they happen and come up with plans of how to deal with them. In Dubai, with the huge pressures contractors and consultants are under, it isn't easy to provide the resources. At the moment glass is a huge issue, which is understandable as everything needs glass.

Are you concerned that material and labour resource problems are going to become more of an issue?

I would say those contractors who won projects in 2002 and 2003 probably made much lower profits than anticipated because of the increased cost of basic materials. However, the margins contractors have enjoyed over the latter end of 2005, 2006 and into 2007 are such that, if they don't make money, they shouldn't be in business.

How is Damac dealing with a growing awareness of sustainability and environmental concerns?

In all of our developments, we ask our consultants to look closely at the best and most environmental way of doing things, and ask our contractors to look at the physical project execution to address those issues. At the moment, in a separate unit of the organisation, we are looking at whether the customer really understands what he or she wants in terms of sustainable, re-usable and environmentally friendly products. And whatever we get as a response from that, whatever the latest technology is, we will ensure that we implement it.

How much more expensive is a green building?

We are looking at 1.25-2.5% as a number, and on a case-by-case basis we believe that is manageable within the development costs of the project, if that is what the customer wants.

Do you believe that the developer should implement environmental directives or do you believe a whole raft of bodies should be involved?

In many respects, the government has to make the leap because it is the body that has the overall social responsibility for the community.

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